Pre-Paid Suffers Legal Setback

Pre-Paid Legal Services (PPD Quote) has failed to convince a federal judge that the company is not an illegal pyramid scheme.

The legal services provider, which employs the same controversial marketing strategy made famous by Amway, this week lost a motion to dismiss a class-action lawsuit filed by sales associates who feel they were scammed by the company. The ruling opens the door for a full-blown trial that could prove devastating to the so-called multilevel marketing, or MLM, company.

"It should surprise nobody that has either studied or been the victim of Pre-Paid's MLM business practices that the judge would rule in favor of the associate plaintiffs when the case was presented by a competent law firm," said one hedge fund manager with a large short position in the stock. "This case goes to the heart of their MLM practices, and the judge appears to agree it has merit to proceed." ...